Varcoe: Another jolt hits Alberta’s power sector

The chief executive of the Alberta Balancing Pool has suddenly left the organization.

And the electricity industry’s watchdog, the Market Surveillance Administrator (MSA), is still searching for a permanent head, seven months after the previous one left.

Now, the official Opposition wants Alberta’s auditor general to delve into the province’s ongoing electricity issues.

United Conservative Party MLAs want the A-G’s office to conduct an audit and tally up the total cost of the NDP’s decisions to phase out coal-fired power plants, subsidize consumer power bills and shoulder financial losses inside the Balancing Pool.

These events — along with legislation introduced last week to prepare Alberta for a new capacity market in electricity — give the impression a whirlwind has touched down in the power sector.

That impression would be right.

Alberta’s electricity industry is caught up in a vortex of change swirling across the sector.

For example, Balancing Pool CEO Bruce Roberts unexpectedly left the government agency earlier this month.

A terse three-sentence statement by the agency provided little insight into his departure. Roberts confirmed “it was my decision to leave” but declined further comment.

Balancing Pool chairman Robert Bhatia wouldn’t discuss the matter, but expects a new CEO to be in place soon.

“We’re working hard on the issues that the Balancing Pool needs to deal with,” he said in an interview.

The independent agency has been at the epicentre of change within the sector since the Notley government took power in 2015.

After the province boosted its carbon levy on heavy industrial emitters, such as coal-fired generating plants, the government inadvertently tripped an opt-out clause contained in existing power contracts.

This allowed holders of these unprofitable electricity deals, known as power purchase arrangements (PPAs), to return them to the Balancing Pool.

The government agency backstops all PPAs. It was soon holding the bag on losses of up to $70 million a month as electricity prices fell to two-decade lows.

Amid opposition accusations of government meddling, the province lent the agency hundreds of millions of dollars — money that must be repaid by consumers through a surcharge on their monthly power bills.

The Balancing Pool isn’t the only electricity related institution looking for a new leader.

The government is also looking for a permanent head for the Market Surveillance Administrator — the watchdog agency for Alberta’s deregulated power market — after the previous CEO left the post in September.

Alberta’s Energy Department said the recruitment process is continuing.

“This is exactly the ramifications when you have a government meddling in the industry,” said United Conservative Party MLA Nathan Cooper.

All of these issues seem unrelated.

Yet, one has to wonder if the government’s drive to slash executive pay at its agencies, boards and commission hasn’t played a part in the brain drain at the top of these institutions.

It certainly comes at an inopportune time as major electricity reforms are still unfolding.

“There are a lot of moving pieces in the air at the same time as a lot of important chairs aren’t really filled,” said David Gray, former head of Alberta’s Utilities Consumer Advocate.

Cooper and fellow UCP MLA Prasad Panda sent a letter to auditor general’s office last week, asking for an audit to determine the “full costs and implications” of the PPA losses, the province’s decision to phase-out all coal-fired electricity, and its move to cap electricity rates for residential consumers.

Some of the expenses are already known.

In December 2016, the Notley government announced it would pay $1.36 billion in compensation to close six coal-fired generating plants early.

In last month’s budget, the province set aside $74 million for this fiscal year to cover the cost of limiting electricity rates for residential consumers to 6.8 cents per kilowatt-hour.

The price ceiling, which kicked in for the first time this month, remains in place until May 2021, meaning the price tag could grow.

The biggest bill will come from the power purchase arrangements.

After PPA holders gave the under-water agreements back to the Balancing Pool two years ago, the organization quickly burned through more than $700 million from its investment portfolio.

It then needed cash from the government. Until this month, the Balancing Pool has borrowed $816 million from the province.

The government expects the agency may have to provide another $337 million before all of the PPAs wind down in 2020, although higher power prices could shrink those future losses.

Add these costs up and they extend well into the billions.

“This is just a big circus,” said former Balancing Pool CEO Gary Reynolds. “Everyone tried to pretend it hasn’t been a huge mistake … just look at the numbers coming out.”

The auditor general has the power to examine these complex issues and determine how electricity consumers and taxpayers will be affected.

“The numbers are piling up,” said Cooper. “He’s the only one with the scope to be able to have an all-across-government look at the impact of their decisions.”

An official in the auditor general’s office said the letter is under serious consideration.

There’s no question the industry is still trying to find its equilibrium after major changes throughout the sector.

The design of the new capacity power market, which will kick into place by 2021, is another essential piece in the puzzle.

“We have spent a lot of time in fixing a system that was broken for a number of years,” Energy Minister Marg McCuaig-Boyd told the legislature last week.

That’s up for debate.

But to understand where we’re going, Albertans need to know how we got here.

A review by the auditor general would a good a place to start the journey toward electricity enlightenment.

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